KEOGH Plan a retirement plan designed for people who are self-employed

Large Capitalization Stock a company with over $100,000,000 in market capitalization

Letter of Intent formalizes the relationship between a company that is preparing to go public and an underwriter, including specification of the terms of the underwriter's agreement

Leverage a strategy involving a small cash outlay for a securities transaction, with borrowed funds making up the remainder; increases both the risk and the potential for gain; buying securities on margin is one example

Liquidation Equity the value of an account if the positions were closed (liquidated)

Listed Stock a stock on an organized exchange (e.g., the American Stock Exchange), as opposed to unlisted stocks sold on the Over the Counter Market, a nationwide computer network

Load term for a commission charged on mutual funds

Long-Bond can refer to any bond with ten years or more to maturity, but often refers specifically to 30-year Treasury bonds

M1 a statistic indicating the amount of cash, currency, and checking deposits in the economy

Macroeconomics in economics, the study of the entire economy, which currently refers to the global economy

Margin an investor buys on margin when he or she borrows money to buy stock

Market Capitalization the price per share of a company’s stock multiplied by the number of shares outstanding; it indicates the total market value of the company, and can be significantly larger than the “Float”

Market Maker in the over the counter market, a firm that creates a price at which they are willing to purchase and sell a given security on a regular and continuous basis

Market Timing trying to predict the direction of the market to guide one’s investments—this is recognized as a difficult market strategy and has shown only limited success

Maturity the date on which the face value of a bond will be paid by the issuer

Merger when two or more companies form a larger corporation by combining operations

Money Market Fund a type of mutual fund that invests in short-term debt instruments issued by large corporations and governments, passing the interest of these short term debts on to fund investors

Municipal Bond a bond issued by a city, state, or locality in order to finance public works such as schools, libraries, hospitals, etc.; interest earned on municipal bonds is exempt from federal taxes and may also be exempt from state and, more rarely, local taxes

Mutual Fund a professionally-managed securities fund that pools the money of a number of investors

FINRA a private organization that helps to regulate stock and bond markets

NASDAQ NASDAQ Stock Market an electronic system created in 1971 by the NASD (now FINRA) to link traders who deal in over the counter stocks.

NAV Net Asset Value—in other words, the price of a mutual fund

Net Income a company’s profits after taxes

New Issue a company that has recently gone public

No-Load describes a mutual fund that does not have a commission

Odd Lot an investor buys an “odd lot” when he or she buys fewer than 100 shares

Offering Price first price at which an initial public offering (IPO) is sold to the public, which may be set by the lead manager following the close of the market the night before shares will be distributed to IPO buyers or, in some cases, the weekend before

Operating Margin the ratio of a company’s profits (before interest and taxes) to the company’s total revenues, used as a measure of profitability

Option a contract giving an investor either the right to buy or the right to sell 100 shares of stock over a fixed period of time; a call option refers to the right to buy, while a put option refers to the right to sell

Order Book listing of buy orders from investors that are accumulating for an IPO; can be substantially oversubscribed

Outstanding refers to the number of shares held by investors

Overbought describes a stock that is priced at speculative levels

Overheated describes a rapidly growing economy in which inflation is starting to accelerate

P/E Ratio see “Price-Earnings Ratio”

Paper Profit or Paper Loss describes a situation in which a client would have realized capital gains or losses due to changes in a stock’s value if he or she had sold, although the client did not in fact sell

Penny Stock a small company whose share price is $5 or less, usually a very speculative investment

Pink Sheet Stocks Pink sheets refer to the daily printed listings from the National Quotation Bureau (named for the color of paper on which they have traditionally been printed) containing quotes for thousands of extremely small companies (i.e., penny stocks) on the over the counter market.

Premium usually, the difference between an IPO price and its opening price, although some investors consider the difference between the IPO price and its price at the close of the first day to be a better measure of the IPO premium

Price-Earnings Ratio (P/E Ratio) used by analysts to determine whether a stock is undervalued or overvalued; it is determined by dividing the stock price by earnings per share (e.g., if a stock is selling for $50 per share and has earnings per share of $10, the P/E ratio is 5)

Primary Market market for an initial public offering (IPO)

Prime Brokerage Prime Brokerage enables a substantial institutional or individual trader to maintain one account location consolidating assets, securities trading activity, reporting needs, and financing.

Prime Rate the rate charged by banks to their most financially strong customers

Private Corporation a company not listed on a stock exchange or the over the counter market, sometimes called a closed corporation

Program Trading use of sophisticated computer software by major institutions to determine trading decisions, usually involving multiple simultaneous transactions

Prospectus a document filed with the SEC that provides disclosure of information needed by investors considering acquiring shares in a proposed or existing business venture

Proxy authorization given by a stockholder to someone else to vote his or her shares, as at a shareholders' meeting